The tech giant has promised that the $US5 billion campus will bring economic prosperity to its chosen location. Seattle – where Amazon planted its first headquarters in the late 1990s – has seen this financial boost first-hand.
Now Seattle’s largest employer, Amazon employs 40,000 people at its headquarters and has served as the catalyst for the city’s booming tech industry.
The Seattle Times reports that the leaders echoed many of the concerns that residents have voiced regarding Amazon’s role in several issues now facing the city, including gentrification, rising housing prices, and unrelenting construction and gridlock.
This week, Amazon escalated a fight over a proposed tax that could help alleviate the city’s affordable housing and homelessness crises. The company does not want to pay the tax, so it’s halting major expansion plans in Seattle.
The HQ2 city could also end up dealing with some of these less-than-positive changes, explained below:
Amazon’s dominance has contributed to making Seattle’s housing less affordable for some longtime residents, who have accused the company of perpetuating income inequality in the city.
As Amazon grew between 2005 and 2015, Seattle’s median rent went from $US1,008 to $US1,286, an increase nearly three times the national median. Recent data shows Seattle’s median home price hit $US730,000 in mid-2017, up nearly 17% from a year ago.
As Marketwatch notes, Amazon may have also contributed to rent hikes in nearby towns, as residents search for more affordable housing outside downtown Seattle. For example, rents in Tacoma, Washington – an hourlong metro ride from Seattle’s center – increased nearly three times the national average in 2017, according to a recent report by the real-estate website Trulia.
Housing experts worry that HQ2 could lead to increases in housing prices in the chosen city as well. However, as Zillow Senior Economist Aaron Terrazas told BI, Amazon’s presence will likely not be the sole cause of a rise in rents.
The expansion of the city’s tech industry (most notably Amazon) has clogged roadways, according to The Seattle Times.
Seattle drivers spent an average of 55 hours in traffic in 2016, placing it among the top 10 worst US cities for congestion, according to the most recent analysis by Inrix. In June 2017, King County Metro even added more buses to accommodate Amazon’s summer interns.
HQ2 is expected to create 50,000 jobs, which may encourage an influx of new residents using the chosen city’s roads.
Amazon did not respond to a request for comment.
With wealthier citizens willing to pay higher rents, Seattle has seen a construction boom.
“As the city transforms with taller and taller buildings, Seattle this summer had 58 construction cranes reshaping the skyline – more than any other city in the country, according to recent data,” The Seattle Times reported in 2016.
In fact, crane count-tracker Rider Levett Bucknall found that Seattle had a whopping 18-crane lead over second-place Los Angeles.
Amazon says it will invest $US5 billion in the construction of HQ2, a project that will likely spur other redevelopment efforts in the undetermined city.
In a statement to Business Insider, an Amazon spokesperson touted the impact the company’s headquarters has had on the city of Seattle.
“Amazon has invested over $US4 billion in its urban campus in Seattle and paid more than $US25 billion in compensation to its employees over the last seven years,” the spokesperson said.
Loss of local businesses
Amazon workers in Seattle haven’t necessarily created a boom in long-time local businesses.
Cynthia Brothers, a 36-year-old Seattle native, launched Vanishing Seattle, an Instagram account that documents longstanding businesses that have shuttered, in 2016. In recent years, Brothers has noticed that coffee shops, grocers, restaurants, and bars beloved by locals are increasingly shutting down to make way for upscale redevelopments.
In an interview with Business Insider in February, Brothers referred to Amazon’s Seattle campus as “an artificial neighbourhood.”
Several restaurants have gone out of business in the Seattle neighbourhood of South Lake Union, where Amazon’s headquarters is located, because diners didn’t turn out as expected, Marketplace reports.
“The worst thing is having an empty restaurant and then trying to keep your staff motivated and energised,” Josh Henderson, the owner of a recently closed restaurant called Vestal, told Marketplace. “It’s a soul-sucking experience.”
An Amazon spokesperson previously told BI that the company has created thousands of non-Amazon jobs in Seattle.
“We estimate these investments resulted in an additional $US38 billion to the city’s economy from 2010 to 2016 and created more than 50,000 additional jobs on top of our direct hires,” the statement reads.
As perceived tech industry gentrifiers push out longtime locals in the chosen HQ2 city, resentment could follow.
“High demand and low inventory creates bidding wars and animosity among those who can’t even afford a starter home in the city they grew up in,” Kurt Schlosser wrote in September for GeekWire.
Some Seattle natives say that the city’s culture has disappeared with the local businesses that have closed since Amazon came.
“I worry about where the counterculture is going to go,” Brothers told BI in February. “Because the counterculture was Seattle’s culture. We need to create a city that’s not just about tech, convenience, consumption, and disruption.”
On Amazon’s careers page, the company describes its workforce as “a dedicated and diverse group of individuals coming together to serve the customer.”
With rising housing prices come concerns about Amazon pushing out lower-income and minority communities, in favour of affluent, majority-white tech workers.
“There are a lot of people in Seattle who are at the losing end of the prosperity that Amazon brings,” said Knute Berger, a journalist, historian, and Seattle native. “There has been a lot of displacement. Minority communities have largely been driven out of the city for less expensive suburbs, and competition for homes and rents has dramatically increased, contributing to the rising homeless population.”
Mary’s Place, a Seattle nonprofit that operates several homeless shelters, said in September that it was on pace to fill 170,000 beds at overnight shelters in 2017. That’s up from 2,300 beds in 2010, The Boston Globe reports.
A loss in local tax money
In Amazon’s hometown of Seattle, the company has ramped up a dispute over a tax that the city council is considering. The tax – which could cost Amazon roughly $US20 million to $US30 million annually – is meant to address homelessness in the city.
On Wednesday, The Seattle Times reported that Amazon is halting the construction of a downtown tower and reconsidering occupying another that’s under construction, putting at least 7,000 jobs in jeopardy. There’s reason to believe that Amazon could sway local tax laws in the chosen HQ2 city.
In addition, the top HQ2 contenders are offering billions of dollars in tax breaks in exchange for the campus.
Maryland passed a $US8.5 billion incentives package designed to attract Amazon’s second headquarters to the state, while New Jersey put $US7 billion on the table at the beginning of the HQ2 search process.
Offering enormous tax breaks to one of the most successful companies in the world rubs some people the wrong way. A petition started by a group of elite economists argues that cities – including the top contenders for HQ2 – should band together against such incentives because they “divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation.”
In return for subsidies, local governments are promised an increase in jobs and economic prosperity. But that doesn’t always happen.
A 2018 study by the left-leaning Economic Policy Institute found that the overall employment rates don’t change when Amazon opens a new warehouse in a city.
Amazon, which has opened fulfillment centres in 25 states, disputes the group’s findings.
“If you look at more current information, you will see that these data points are not demonstrative of our current network, community impact, and both the direct and indirect job creation near fulfillment centres,” a company representative said previously, adding that “Amazon’s investments led to the creation of 200,000 additional non-Amazon jobs, ranging from construction jobs to healthcare industry positions.”
The winning HQ2 city should consider how the 8-million-square-foot campus will transform its urban (or suburban) fabric over the next few decades, according to Amy Webb, a futurist who periodically consults local governments.
“I don’t know a single [US] city that has a team dedicated to longterm planning, which looks at how its companies and the city itself will grow,” she told BI. “In a sense, HQ2 has become like a lottery … And in the meantime, the city did not say, in exchange for these tax breaks, you have to invest in public schools and transportation, you have to employ people who live inside the city, you have to contribute to the tax base and the people who work there – all those things that are good for the future of the city.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.